Carlo Hank Rhon Understanding Financial Statements
Learning how to read a financial statement does not have to be as difficult as it seems according to Carlos Hank Rhon. If you can follow directions for a recipe or fill out a loan application, you should be able to understand how to read a financial statement, it may seem to be overwhelming at times but it really is not as bad as it seems. The first thing that you should know is that there are four main types of financial statements out there. They are balance sheets, income statements, cash flow statements and statements of shareholder’s equity.
Balance sheets are designed to show us what a company owns and what they owe at a fixed period in time, notes Carlos Hank Rhon. An income statement will show you how much money a company has made over time and how much they have spent out. Cash flow statements show us the exchange of money between the company and other businesses or individuals and the statement of shareholder equity show all changes in the interests of the company’s shareholders over a certain period of time.
A balance sheet will provide you with all of the detailed information that you need to know when it comes to a company’s assets, their liabilities and their shareholder’s equity. Assets are all of the things that a company owns which has some sort of value. This means that these items can be sold or used by the company to make products or provide services which can be sold for profit. Liabilities are amounts of money that a company currently owes to others. This can include various types of obligations, money borrowed from a bank, rent to use a building or money that is owed to suppliers for office materials. A Shareholder’s equity is also commonly referred to as capital or net worth. It is the money that would be left over if the company sold all of its assets and paid off all of its current liabilities. The leftover money would belong to the shareholders or the owners of the company.
An income statement, explains Carlos Hank Rhon, is a report that shows you how much revenue your company has earned over a specific amount of time, typically a year or a portion of a year. Income statements will also show the costs and expenses that were involved in earning that revenue. The bottom line of the income statement will s how you the company’s overall net earnings and losses therefore it basically shows you how much a company has earned or lost over a specific period of time. Income statements can also report earnings per share, or EPS. This lets you know the amount of money shareholders would receive if the company were to distribute all of its net earnings for that period.
A cash flow statement will report a company’s profits and debts which are very important because a company needs to always have enough cash on hand to pay off its expenses and purchase more assets if needed. It is also good to have a healthy cash flow in case any emergencies happen to come up that the company needs to pay for.
Content Source: http://carloshank.wordpress.com/2012/07/20/carlo-hank-rhon-understanding-financial-statements/
Processing your request, Please wait....
